Toshiba outsourcing semiconductor production to rival Samsung

For new orders for the next financial year beginning in April, Toshiba will design cutting-edge system chips but will outsource production to Samsung, and maybe other foundries, to avoid costly capital investment outlays. The rare deal between rivals Toshiba and Samsung, which is expanding into microprocessors, frees up resources for other projects, which analysts see as positive.

“Thanks to this tie-up Toshiba will gain a stronger position,” Yumi Nishimura, a senior market analyst at Daiwa Securities Capital Markets, said after the Nikkei business daily reported the move earlier on Friday.

“In a situation when bigger capacity is required, the burden of capital investment can be too big for one company, so the accord is a positive factor for Toshiba.”

System chips, used in digital devices, have seen explosive demand growth this year, due to rising popularity of smartphones, tablet PCs and Web-to-TV devices. Toshiba said it would sell to Sony its system chip production line in Nagasaki prefecture, a deal which an industry source has estimated at 50 billion yen. The line produces chips for Sony PlayStations and is housed in a factory owned by Sony. The electronics conglomerate whose businesses also include nuclear plants, also plans to build a new domestic factory to make LCD panels with total investment likely to be over 100 billion yen ($1.2 billion), a prefectural government official said on Friday. Toshiba, the third most actively traded stock on Tokyo’s main board on Friday, rose 0.7 percent to 441 yen outperforming a 0.7 percent decline in the benchmark Nikkei average.

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